From one angle of the 2009 Budget Mr Darling increased the interest in property purchase at the lower end of the market. He said, “I will double the stamp duty limit for first-time buyers from tonight from £125,000 to £250,000 for this year and next.” This action is pitched against the fact that HMRC are trying to increase the HMRC “tax take” on amateur property speculators.
Sophisticated software means HMRC can “interrogate” the Land Registry database more efficiently than say five or ten years ago, and their access to websites etc. is much greater. With the increased penalty system for HMRC enquiries from
What Should I Do?
The new penalty system is “behaviour based” so disclosure of undisclosed income and sales from property at an early stage is important. It could be that expenses exceed the income, e.g. mortgage interest and by the time the correct calculation is made there will be very little extra tax and penalties to collect. Some property transactions can be deemed to be taxed as “trading” as opposed to “capital”, i.e. subject to income tax.
The scope of ITA 2007 s 756 is broad and catches transactions which have little or no element of artificiality; therefore the avoidance can be accidental or unwitting by the property or landowner. There could be everyday property owners who will be caught by these provisions. Another area of HMRC attack is undeclared rental income from second homes or a buy to let portfolio. Often the mortgage interest etc. can exceed income but the existence of the income still has to be declared.